Mergers and Acquisitions Insights

Regulators officially approved the Capital One $35B acquisition of Discover Financial Services - clearing the path for a transformative deal expected to close next month. Once finalized, the combined entity will become the largest credit card issuer in the U.S. by total loan volume (~$250B) and hold approximately 22% of the market share. Regulators—including the Federal Reserve Board and OCC concluded the merger would not significantly reduce competition or harm community service obligations. Still, the approval wasn’t without strings: - Capital One must address existing enforcement issues at Discover. -The Fed fined Discover $100M for long-term overcharging of merchant fees. -The FDIC imposed $1.2B in restitution and a $150M civil penalty on Discover. Strategically and most significantly, this merger gives Capital One ownership of Discover’s payment network, offering a new angle of vertical integration —something few U.S. banks can claim in a space dominated by Visa Mastercard and American Express . Bankers—this move reshapes your competitive landscape. What does this mean for your credit card portfolio, #fintech partnerships, or network strategy? #payments #communitybanking #thefed #creditunions

US life insurance now has three ownership regimes and who owns what is actually an important diligence question for advisors. The first is private equity. Apollo owns Athene. KKR owns Global Atlantic. Brookfield owns American National. Blackstone owns Everlake. These carriers integrate balance sheets with private credit and alternative asset management platforms inside the same parent. The model produces high spread, aggressive product pricing, and substantial growth in indexed annuities. It also concentrates exposure to private credit performance and affiliated counterparty risk. The second is foreign capital, dominated by Japanese carriers. Nippon Life closed an $8.4 billion acquisition of Resolution Life in October and holds a $3.8 billion stake in Corebridge. Dai-ichi owns Protective, now at $142 billion in assets. Sumitomo owns Symetra. Meiji Yasuda owns The Standard and closed its $2.3 billion acquisition of the Banner Life family of companies in February. US insurers owned by Japanese carriers wrote more than $68 billion in direct premiums in 2024. Japanese carriers are repositioning ahead of the Economic Solvency Ratio, the new economic-value-based capital regime that took effect March 31. It makes long-duration guaranteed liabilities capital-intensive in yen, and US dollar spread businesses ease that pressure. The model trades parent-level capital optimization for distance between the policyholder and the regulating jurisdiction that originally chartered the carrier. The third is the mutual segment. Northwestern Mutual, MassMutual, New York Life, Guardian, and Penn Mutual remain owned by their policyholders. The model produces lower spread, slower product innovation, and reduced capacity for the most yield-driven products. It also produces longer planning horizons, lower exposure to affiliated credit, and fewer incentives to transfer general account risk offshore. Mutuals have lost share in indexed annuity markets where PE-backed pricing is sharpest and retained it where dividend stability matters more than crediting rate. In an interesting twist, the first two regimes have started crossing. Brookfield's American National and Dai-ichi Frontier Life signed a flow reinsurance agreement effective October. Athene announced a block reinsurance transaction with Sony Life the same week, bringing its total Japanese reinsurance volume to roughly $19 billion. PE-controlled US balance sheets and Japanese carriers are now counterparties to each other. When advisors ask who owns the US life insurance industry, the answer has three parts. Each regime optimizes for something different and makes trade-offs on spread, capacity, transparency, and policyholder relationship. The diligence question is which math is running behind any specific recommendation.

VMware Contracts: Where a Promise Means Nothing Strong words, I know. But that’s exactly Tesco’s argument in a new lawsuit against Broadcom. Here’s the painful story:  • In 2021, Tesco bought perpetual VMware licenses with a 5-year support agreement and an option to extend for another 4 years.  • After Broadcom acquired VMware, support and extensions were discontinued, forcing customers toward subscription models.  • Tesco claims this amounts to paying twice for software they already own.  • Tesco is suing Broadcom, VMware, and Computacenter, seeking at least £100M per defendant—potentially over £300M total. Takeaways for IT Buyers & SAM Pros:  • Examine change-in-control language carefully—“perpetual” isn’t always guaranteed post-acquisition.  • Scrutinize renewal and support provisions carefully.  • Begin building a VMware reduction plan—whether through cloud alternatives, phased migrations, or diversification.  • It’s time to take third-party support seriously — providers like Origina are now a credible alternative worth exploring. Tesco, the UK’s largest supermarket, has the resources to litigate. Many organizations don’t. The outcome of this case could set a powerful precedent for how far Broadcom can push its customers.

Today, Lazard published our 2025 M&A Review and 2026 Outlook Report examining the historical quantitative and qualitative drivers of M&A, the additional factors that accelerated activity in 2025, and the emerging themes that could shape dealmaking in the year ahead.   Last year underscored the market’s ability to look beyond short-term volatility to pursue long-term strategic objectives. Global M&A value rose 40 percent in 2025, driven by a sharp increase in megadeals and further strengthened by strategic repositioning, divestitures, and a rise in take private transactions. North America led the expansion in activity, supported by a more accommodating regulatory environment, while technology, industrials, financials, and healthcare were the top sectors, with technology capturing over 20 percent of global M&A value. We expect this momentum to continue into 2026, with more stable financing conditions, rising corporate ambition, private equity monetization, and innovation-led opportunities.   Looking ahead, a key theme is the increasing importance of “contextual alpha”—the ability to navigate non-financial dimensions such as geopolitical dynamics, regulatory environments, macroeconomic conditions, and sector-level nuances to unlock deal value. You will also find in this report analysis from Lazard Geopolitical Advisory that highlights how geopolitical dynamics are increasingly shaping corporate strategy and playing a role in M&A decision-making.   At Lazard, we are defined by our ability to deliver independent, expert advice grounded in contextual alpha — helping leaders see beyond what the world sees today. With our deep local and sector expertise, and the conviction to speak truth to power, we help our clients navigate complexity, evaluate strategic options, and advance long-term objectives with clarity and confidence.   Read the full report: https://lnkd.in/ee_CvfU9

Recently, I’ve been asked by several of my colleagues regarding the the structuring of the sale of AskBio Inc. to Bayer. Maintaining separate operating independence and control over therapeutic development after selling a biotechnology company requires proactive, legally binding structural mechanisms negotiated before the deal closes. The goal is to separate the economic ownership from the operational governance. The wholly owned operating subsidiary is the gold standard for maintaining independence. Instead of "absorbing" your company into their existing structure, the buyer keeps your company as a standalone legal entity. Key aspects are: 1. Maintain your own Profit & Loss statement. If you control your own budget and bank accounts, you retain the power to hire, fire, and invest. As we were not yet generating revenue, we negotiated a funding commitment for a period of years, where cash would be injected into the company to support product development. 2. Keep Distinct Branding and Culture: Contractually agree that the buyer will not rebrand the entity or force the adoption of their corporate HR/culture policies for a set number of years. 3. Implement "Arm's Length" Agreement: Ensure that any services the parent company provides (legal, accounting, IT) are governed by a services agreement so they cannot dictate how you operate under the guise of "integration." 4. Maintain Independent Board of Directors: Negotiate a Board for your subsidiary that includes representative from the company and the buyer, and possibly a neutral third party. 5. Create Reserved Matters List: Create a list of items that the parent company cannot vote on without your consent, such as: Changes to the R&D roadmap, discontinuation of products in development, clinical trial design and site selection, and key personnel appointments. 6. Negotiate Performance-Linked Budgets: Ensure that as long as you hit certain milestones, your funding is contractually protected and cannot be diverted to other corporate projects. 7. Require high legal standard for CRE (commercially reasonable effort efforts). If the buyer fails to put enough resources behind a drug in development, they are in breach of contract. 8. Consider a "Buy-Back" Option: Negotiate a right to buy the company or therapeutic back at a pre-set price (or for the cost of development) if the buyer decides to pivot away from your core therapeutic area. (Hard to get). Please include in comments any other suggestions. It took me three exits to figure out this list. Maybe next time I’ll get it exactly right! #biotech #companysale #therapeuticdevelopment #operatingindependence #exit #drugdevelopment #biotechnology

Investment Banking M&A: How To Build A Merger Model (Free Excel Download) 🏆 Merger models are constructed to simulate the impact of two companies merging, or one company taking over the other. The analysis represents the potential combination of two companies that come together via an M&A process. The model helps understand how an acquisition would be facilitated and assesses the impact on the acquirer’s financials. Merger Model – Key Inputs: Valuation This includes the latest share prices of the target and acquirer companies (if listed), the basic number of shares outstanding, potentially dilutive securities, net debt, current credit rating, and other adjustments to EV of both companies. Financial Statements This information is largely taken from the income statements and the most recent balance sheets of both companies. This typically includes Sales, EBITDA, EBIT, and EPS, plus balance sheet data, the marginal tax rate, and the effective tax rate. M&A Model Assumptions: Acquisition/Control Premium This is a key assumption that will affect all model outputs – typical historical premiums are between 20% – 40% of the price. But there may be more data available that is relevant to recent activity in the sector or market. Financing Mix This is another key driver of the model as it can help make a decision on how to fund the offer – whether to offer cash or equity. Cost of Financing This needs to be considered in relation to the forecast cash flow assumptions of the new company and assess the cost of debt versus the cost of equity. Potential Impact on Post-Transaction Credit Ratings  Is it likely that there will be an upgrade or downgrade in credit ratings? Acquirer’s Debt Raising Capability This investigates the acquirer’s ability to raise debt at the time of the deal and investigates the current debt status of the company. Impact of Equity Financing This is the potential impact on the acquirer’s post-deal earnings and ownership. Potential Flow-Back Issues: This also includes the preference of target shareholders. Transaction Fees M&A transactions require acquirers to pay advisory fees, debt issuance fees and equity issuance fees which will need to be funded. Synergies Potential cost reductions are the most common type of synergies although there may be others. Often there can be a range of synergies that may be possible depending on the projected spending plans of the newly merged company. Interest This relates to the potential interest to service the new acquisition debt (%) and interest income on cash (%). It might be noted that synergy expectations should always be considered when assessing a deal, as it can significantly influence post-deal value creation. Want to refine your skills & break into M&A? Leave your email below for a free excel template download👇

In a merger, the word “synergy” is often used to justify the deal.  In large enterprises, that synergy usually slows down at the data layer. When two organisations combine, the Board expects a unified view of customers, margins, supply chains, and risk exposure.  What they often inherit instead is a fragmented estate: multiple Snowflake environments, parallel ERP systems, legacy SQL Servers still running critical workloads, and no shared definition of basic metrics. This fragmentation is not an IT inconvenience. It is a structural drag on EBITDA. Finance teams spend months reconciling numbers instead of integrating operations.  Procurement savings remain theoretical because spend data cannot be harmonised.  Cross-sell strategies underperform because customer records do not align.  Leadership debates whose dashboard is “correct” instead of focusing on growth. It also creates 𝐀𝐈 𝐩𝐚𝐫𝐚𝐥𝐲𝐬𝐢𝐬. Enterprises talk about Copilots, GenAI layers, and agentic automation.  But you cannot deploy intelligent workflows on top of contradictory data logic.  If “Revenue” or “Margin” means something different across business units, automation only scales inconsistency. Post-merger value realisation requires a shift from moving data to governing logic. That begins with defining a shared semantic layer before merging a single table.  1. Agree on enterprise-wide definitions.  2. Assign domain accountability.  3. Rationalise overlapping platforms.  4. Decommission legacy debt rather than stacking new cloud costs on top of old architecture. True cost synergy comes from building a disciplined, scalable data foundation that supports unified reporting, controlled cloud economics, and AI readiness. Modernization in this context is about ensuring the combined enterprise operates on one coherent data engine, so the merger becomes a multiplier of value. #MergersAndAcquisitions #DataStrategy #EnterpriseAI #DigitalTransformation #DataGovernance #BusinessStrategy

When policy changes overnight, so do deals. I got the opportunity to talk with the The Wall Street Journal about how today’s economic landscape is forcing dealmakers to rethink their entire approach. The speed of policy shifts is creating a new level of uncertainty in M&A. Deals that made sense last month might not work today, here's what’s happening: 📰 Government Moves Are Reshaping Business Models – Companies that rely on federal funding or incentives (like renewables & healthcare) are in limbo. A solar startup in West Virginia had to pause $25M worth of projects because their expected government reimbursements were frozen. That kind of risk is now a real factor in deal valuation. 📰 Tariffs Are Disrupting Supply Chains – A Canadian furniture company just laid off 115 workers because U.S. buyers started sourcing from Asia instead, anticipating a 25% #tariff hike. That’s a prime example of how protectionist policies are shifting M&A dynamics in real time. 📰 Speed is More Critical Than Ever – With so many unknowns, companies are pushing to close deals faster to avoid getting caught in sudden #policy shifts. We’re seeing acquirers put more weight on scenario planning: “What happens if a new tariff pops up?” or “How does this deal hold up if federal funding dries up?" Adaptability and speed are now the name of the game. The best dealmakers will be the ones who adapt the fastest. How's your deal strategy adjusting? #MarketTrends #Acquisitions

News analysis: Capital One’s recently announced $35.3 billion acquisition of Discover Financial isn’t just about getting bigger — gaining “scale” in Wall Street-speak — it’s a bid to protect itself against a rising tide of fintech and regulatory threats. It’s a chess move by one of the savviest long-term thinkers in American finance, Capital One CEO Richard Fairbank. As a co-founder of a top 10 U.S. bank by assets, his tenure is a rarity in a banking world dominated by institutions like JPMorgan Chase that trace their origins to shortly after the signing of the Declaration of Independence. Fairbank, who became a billionaire by building Capital One into a credit card giant since its 1994 IPO, is betting that buying rival card company Discover will better position the company for global payments’ murky future. The industry is a dynamic web where players of all stripes — from traditional banks to fintech players and tech giants — are all seeking to stake out a corner in a market worth trillions of dollars by eating into incumbents’ share amid the rapid growth of e-commerce and digital payments. The deal, if approved, enables Capital One to leapfrog JPMorgan as the biggest credit card company by loans, and solidifies its position as the third largest by purchase volume. It also adds heft to Capital One’s banking operations with $109 billion in total deposits from Discover’s digital bank and helps the combined entity shave $1.5 billion in expenses by 2027. But it’s Discover’s payments network — the “rails” that shuffle digital dollars between consumers and merchants, collecting tolls along the way — that Fairbank repeatedly praised Tuesday when analysts queried him on the strategic merits of the deal. #mergersandacquisitions #creditcards #networks https://lnkd.in/e2EGtCWz

The clause that quietly cut a founder's exit value. Four years ago, I was advising a SaaS company in Singapore. The exciting part was over. Valuation looked strong. The founder was already planning what life looked like post-exit. Then the SPA draft landed. Buried in one of the pages sat three innocent words: "Working capital adjustment." The buyer's team pointed at it casually: "This may change the final price at closing." That's where many founders learn the brutal difference between headline value and real money. Here's what most don't see coming: M&A deals are cash-free, debt-free. You clear the books, take out cash. But the buyer still needs the company running on Day 1. Salaries. Vendor payments. Customer support. Life doesn't pause because ownership changed. So they ask: "What's the normal operating buffer this company needs?" That becomes your working capital target. Deliver less? Price drops. Deliver more? Price rises. Sounds fair in theory. Reality hits when definitions get fuzzy. The SaaS trap: Customer prepayments create deferred revenue. Technically a liability (you owe service delivery). But that cash came in because you were performing well. One line item. Massive price swing. Then the timing games begin: → Receivables questioned for collectability → Payables scrutinized for delayed expenses → Accruals challenged on commissions and bonuses Without clear definitions upfront, closing becomes a fish market negotiation. Except the fish is your purchase price. The hard truth: You think you negotiated a valuation. You actually negotiated a formula. Enterprise value = the headline. Net proceeds = what hits your account. Working capital adjustment = the surprise in between. The fix is simple: Agree on working capital principles upfront. Before drafting. Before you're emotionally committed and just want to close. Quick test: If the deal closes next month, do you know exactly which balance sheet items could reduce your price? If not, your valuation is still just a headline. What's one M&A lesson you wish you'd known earlier? Hi, I’m Sam Lee. I support Business Owners, Founders, M&A Brokers, and M&A Lawyers in getting M&A deals across the line. I share one practical M&A insight each week in my newsletter. If you’ve just received a Non-Binding Offer or Term Sheet, I’m happy to offer a complimentary 60-minute consult to walk you through the commercial terms in plain English. WhatsApp me at +65 8091 7195.